by Al MartinWho Is Martin Armstrong?
(9-28-15) According to his site which is promoting a documentary about him called “The Forecaster” – “After eleven years off the radar, a man resurfaces in Philadelphia, a man who used a computer model and the number pi in the nineties to predict economic turning points with astounding precision: Martin Armstrong predicted the exact date of the October crash in 1987, the demise of the Japanese bull market in 1990, the turning point for the US and European markets in July 1998 and the Nikkei crash in 1989. He was one of the wealthiest Wall Street market analysts and was named economist of the decade and fund manager of the year in 1998.
“But he refused to play along with the bankers’ game and warned his customers that ‘The Club’ was manipulating currency and silver markets. He quickly made powerful enemies: New York investment bankers, hedge funds managers, Salomon Brothers, Goldman Sachs. The FBI and SEC, US Securities and the Exchange Commission, started to show interest in his computer model. In 1999 he was arrested on charges of fraud which he still disputes to this day. He was incarcerated for seven years for contempt of court. After time in solitary confinement and threats against his mother, he signed a partial confession and was sentenced to a further four years.” (http://forecaster-movie.com/en/the-forecaster/)
In another promotion for the movie, the site notes – “Martin Armstrong, once a US based trillion dollar financial advisor, developed a computer model based on the number pi and other cyclical theories to predict economic turning points with eerie accuracy. In the early 80s he established his financial forecasting and advising company Princeton Economics. His forecasts were in great demand worldwide. As Armstrong's recognition grew, prominent New York bankers invited him to join "The Club" to aid them in market manipulation. Martin repeatedly refused. Later that same year (1999) the FBI stormed his offices, confiscating his computer model and accusing him of a 3 billion dollar Ponzi scheme. Was it an attempt to silence him and prevent him from initiating a public discourse on the real Ponzi scheme of debts that the world has been building up for decades? Armstrong predicts that a sovereign debt crisis will start to unfold on a global level after October 1, 2015 - a major pi turning point that his computer mode
l forecasted many years ago.”
Let’s examine Armstrong’s economic analysis in an essay called “Bubble Bubble, Where Is the Bubble?” (http://www.armstrongeconomics.com/archives/37383)
Armstrong writes -- “Whenever I warn of anything using the word “CRASH”, the newspapers immediately report it as a forecast for a crash in the stock market. This demonstrates that there is no consideration that government can also crash and burn — the perfect example of 100% confidence. Yes, if this week simply closes on the Dow below 16280, then we may see that slingshot move I have warned about where in one year we will have a crash and a swing to the upside to new highs. These types of events are the ultimate mind game, but that is how they destroy the majority. As for those who write in, asking which investment will be safe — the answer is NONE.”
What Armstrong says is entirely possible since global banks are trying to keep a dead horse on life support, the horse being a symbol for the planet’s economy. The Fed is not on board which is one of the greatest concerns that most people have who understand economics, while the rest of the planet tries to reduce interest rates, continuing to increase monetary stimulus with bond purchases. Meanwhile the Fed wants to go the other way and reduce monetary accommodation at a time when global inflation rates continue to fall and deflation continues to be the worry of the day.
So why is the Fed so wrongheaded about their policy? Because as Fed Head Janet Yellen said, they are taking a much more insular view of what their mandate is – namely to prevent domestic inflation from rising and to generate full employment. And that is the mandate given the Fed by Congress, but the Fed also has, like all central banks, a greater responsibility to look at the global economy and how what they do will affect the global economy.
The problem arises as it always has with central banks particularly the US Fed where you have a gaggle of left-wing academics on the Fed boards who have absolutely no experience in the real world of economics and markets.
Also the left-wingers are naturally attracted to Keynesian economic policy But this idea that the Fed has about full employment when the labor participation rate is still at near record lows and wages are not growing and inflation continues to fall… It’s simply the wrong time to raise rates to exacerbate the problem.
To reiterate Armstrong – “As for those who write in, asking which investment will be safe — the answer is NONE.” This parallels what newsletter editor Marc Faber said in a recent CNBC interview. (See Is the Global Market Correction Underway? http://www.almartinraw.com/public/column694.html)
What the Fed is trying to do is to try to raise interest rates in an effort to create inflation, which is what has been done in the past. The idea is that you raise prices and the cost of everything by raising interest rates. It’s a back-door way to officially raising inflation. There are only two ways governments can raise inflation – either raise interest rates or raise taxes.
And why do they believe this is so important? Because the Fed like all central banks are afraid of a global deflationary spiral that central banks are powerless to prevent. It should be remembered that central banks can create and control inflation – but they can’t control deflation.
Armstrong continues – “Some people distort the events of the Great Depression to sell gold, but keep in mind that commodities peaked in 1919 and bottomed WITH stocks in 1932. Real estate peaked in 1927 followed by bonds when the Fed cut rates to try to help Europe. Then, everything reversed and stocks soared in 1929, crashed, and burned into 1932 bottoming with commodities.’
The historical parallels that people are concerned about is that now global commodity prices in all sectors, metals, agriculture, everything across the board, commodity prices are falling. This hooks pretty well into historical analogies to past depressions, i.e. that falling commodity prices are the early signs of a potential depression particularly when interest rates are falling. Thus commodities are a bellwether for other markets because they bespeak of a global economic slowdown. Commodity prices are falling because demand for commodities is falling.
“There was NO SINGLE INVESTMENT left standing — ABSOLUTELY NOTHING,” Armstrong continues. “So while the charlatans will try to sell you newsletters with promises of making you 20,000%, keep in mind this is a period of survival we are entering, not wild speculation. If you do not understand the nature of the beast, the beast will have you for lunch.”
He’s right in one respect. Shills in economic media like Bloomberg and CNBC will try to sell the idea that US Treasury Bonds are the holdings of last resort. They also try to sell the idea that we are entering a period where return OF capital is more important than return ON capital. That is actually a sensible thing to tell people. However when you tell people that you have to give them some answer to the question as to safety of capital – and the answer is always US Treasury Bonds, the assumption being that the United States will always be able to service its debt because our debt to GDP level is still lower than many other countries.
“What we have to grasp here is that this is a well organized collapse,” Armstrong continues. Each sector will collapse and set in motion the next. If we get this week-end closing below 16280, then we may be heading for a retest of the August low going into October.”
And that happened. We’re below 16000 and the S&P has traded down as low as 1840. Since I’m trading exclusively from the short side on rallies, it’s clear that the market wants to go lower because volume keeps expanding in declines and diminishing on the rallies. This is a sure sign of a market in trouble.
“This will be the most difficult period ahead to forecast, so pay attention. We are entering a period of chaos that BEGINS with 2015.75; it does not end there with some crash. THIS IS THE BEGINNING, not the END.
“Remember, if stocks decline into 2015.75, that should push more and more capital into government bonds completing the BUBBLE. This is by no means a BUBBLE in stocks, commodities, or the dollar. This is a peak in GOVERNMENT. This is not even a Kondratieff Wave based upon commodities. This is the 309.6-year cycle in government and, unfortunately, the other side of 2015.75 is not looking very pretty. This not about just the collapse of Europe, this is the collapse of Western forms of government that will aid the shift in the financial capital of world to China by 2032. These shifts in global economic trends are measured in hundreds of years and, unfortunately, we have a front row seat. It’s Just Time.”
The global economy is unwinding and there’s no two ways about it. This isn’t just the western economy; it’s the global economy. All of the emerging market states are in trouble. The Arab states are unwinding.
China on the other hand will most likely recover from its stock market fiasco because they have the wherewithal to support their markets forever. The problem becomes – when they stop buying US Treasury Bonds.
Internet nonsense mongers claim that China is dumping Treasuries. However the statistic called the monthly US Treasury Sales report shows that the Chinese are still net buyers because they don’t have anywhere else to go. It’s the same thing with the Saudis, Japan, the Norwegians. They are the four largest purchasers of US Treasuries because they literally don’t have anywhere else to put their money.
Commodity prices are already falling. Prices are falling globally. GDP to debt service ratios are rising globally. I think one milestone to watch is when China, Japan, Saudi Arabia, and Norway can no longer purchase US Treasury Bonds because they need the capital to support their own marketplace.
When you start to see net outflows from those Big Four purchasers of US Treasury instruments, that would be a big warning sign. What’s happening is that the slowdown in purchases of US Treasury securities is being masked by the increasing purchase of US Treasuries by individual investors and funds wherein people go out of stocks and go into bonds. Retail investments in US Treasury Bonds are at an all-time high and that to some extent is masking the reduction in purchases by governments in US Treasury securities but that’s a phenomenon that can’t last forever.
In conclusion watch the monthly US Treasury Capital Inflows Report which tells you the net purchases and sales of all the major purchasers of US Treasuries on the planet. When you start to see the big purchasers start to become net sellers, the United States is in trouble.
Yes, China has been a seller of US Treasuries but what you look for is the monthly numbers of net buyers.
It should be remembered that the United States’ greatest Achilles heel is that it can only finance 26% of its debt internally that 74% of the money the United States uses to finance its debt comes from other countries.
It is also important that the United States maintain the myth that US Treasury Bonds are “sterling” and untouchable. If that myth gets shaken like it did when Congress led by radical republicans who blocked the debt ceiling limit -- it will be another crisis at the end of the month…

* AL MARTIN is an independent economic-political analyst with 25 years of experience as a trader on NYMEX, CME, CBOT and CFTC. As a former contributor to the Presidential Council of Economic Advisors, Al Martin is considered to be a source of independent analysis for financially sophisticated and market savvy investors.

After working as a broker on Wall Street, Al Martin was involved in the so-called "Iran Contra" Affair as a fundraiser for the Bush Cabal from the covert side of government aka the US Shadow Government.

His memoir, "The Conspirators: Secrets of an Iran Contra Insider," (http://www.almartinraw.com) provides an unprecedented look at the frauds of the Bush Cabal during the Iran Contra era. His weekly column, "Behind the Scenes in the Beltway," is published weekly on Al Martin Raw.com, which also publishes a bimonthly newsletter called "Whistleblower Gazette."

Al Martin's new website "Insider Intelligence" (http://www.insiderintelligence.com) will provide a long term macro-view of world markets and how they are affected by backroom realpolitik.